BISA Magazine - Quarter 3, 2017 - 16

FEATURE STORY
duty standard before the DOL rule
ever appeared.
[The big concern with the DOL rule for
banks was the prospect of operating
under a best interest contract exemption, or BIC, which carries the risk of
class action lawsuits. Things appear
better than a year ago in this regard,
said Vosen. Bank programs should not
expect to encounter sanctions as long
as they are moving toward a fiduciary standard.]
When it comes to recruiting, banks
can go to wirehouse managers and
say something such as: "I think we can
help each other out. Your office has
only 37 desks in it - at some point,
someone won't make it." Wirehouse
managers usually don't like to fire
people, especially if they're decent,
hardworking employees who failed
only at cold calling. (Once they have a
live customer in front of them, they are
often very good at offering financial
solutions, Vosen said. And, again, banks
can provide live prospects.)
The bank manager can tell the wirehouse manager: "[We] might have a
place for them to go. And we don't care
if they bring their book with them or
not," said Vosen.
The wirehouse manager does care.
They do not want advisors departing
with their books of business.
Key Investments has done something
of this sort over the past 11-and-a-half
years. "A $250,000 [annual GDC] broker
will not make it at Merrill Lynch." But
consider: The $250,000 advisor built
that book by himself. He didn't have a
steady stream of leads - like a bank
would provide. If he comes to a bank,
he can easily become a $500,000 advisor, said Vosen.
By comparison, Key Investments has
yet to recruit many financial advisors from the independent brokerage
channel, mainly because independent
financial advisors haven't shown interest in working in banks. But given the
burdensome and growing costs of compliance and technology, independents

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are giving banks another look. They
can bring their clients with them and
work their existing books in the "upstairs" of a company headquarters -
not stationed in a branch or branches
living off branch referrals.
There isn't a surge in this activity so
far, but there could be once word
gets out, said Vosen.
A larger question is the extent to
which younger investors want or
need "live" advisors, as opposed to
robo-advisors, but Vosen said he
believes that even Millennials will
want live advice eventually, especially
when they start to accumulate wealth.
Smaller banks and credit unions are
building out digital platforms for
their younger investment clients,
noted Mummau. The institutions
won't make much money with these
digital platforms, but if they can
migrate smaller investors (e.g., less
than $25,000 in investable assets) to
them, that frees up senior advisors
to work with more affluent clients,

have to develop the engine to put
those people before FAs."
Banks have already done the easy
part of setting an FA up at a desk
within a branch, but they haven't
engaged much beyond that point. The
future challenge is how to get nonbranch clients in front of advisors,
said Mummau.
Are reports of a looming advisor
shortage exaggerated, then? "I believe
banks do have a competitive advantage [in recruiting]", said Vosen. The
bigger "crisis," he said, is the aging
financial advisor population. "The industry is not attracting young blood -
that's a big problem."
Still, many probably agree with the
consulting firm's observation that "the
opportunity in investment services
for financial institutions continues to
grow," while a declining advisor head
count at least raises the possibility that
"the industry is ill-prepared to take
advantage of the opportunity," in the
consulting firm's words.

When it comes to recruiting, said Vosen,
banks can go to a wirehouse manager
and say something like: "I think we can
help each other out. Your office has
only 37 desks in it, and at some point,
someone won't make it ..."
those with more than $100,000 in
investable assets, say. Eventually, those
smaller, digital clients may grow into
$100,000 clients.
A good FA only has to do business
with about 100 people a year to be
productive, said Mummau (though
they have to be the right 100). That's
not a big number, especially if the
bank has 100,000 clients, he said. "We

"Thanks to the historically low interest
rate environment, many financial institutions need to find avenues of growth
beyond traditional lending services,"
said Cetera's Rummel. And, despite
the escalating complexities facing the
retail financial advice industry, banks
and credit unions still see retail wealth
management as one of their best bets
for strong potential growth. ▲
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Table of Contents for the Digital Edition of BISA Magazine - Quarter 3, 2017
